China 中國 -  The Trend.  It almost seems inevitable that our children are going to have to learn to speak  Chinese unless there is a dramatic shift in the major economic trend  - China - The Good , the Bad, and the Ugly.   Its Exchange Traded Fund- Ticker Symbol FXI has been the #1 Investment recommendation of Investors411.

China from Google maps

The People’s Republic of China 中國

For some basic information see

• Positions section at top of blog (scroll down to FXI) – contains  reasons to invest.
• Wikipedia will give you a more comprehensive overview

GDP –  China’s GDP numbers have just been published for the last quarter – +6.1% See BBC story. China (@$7 trillion per year GDP) is getting hurt by the worldwide recession. However compare it to the USA 4th quarter GDP -6.3% (@ $14 trillion per year GDP)  

China’s figures are the lowest since they started keeping figures in 1992. They are down 0.7% from the previous quarter, obviously because of the worldwide recession.  The economic trend is also obvious. China’s economy is growing far faster than the USA’s. It may only be a matter of years rather than decades before they become the #1 economy in the world.

Recent Headlines

• China moves into Latin America – Today’s NYT
• China moves to become #1 in the electric car – NYT
• China’s Shopping spree – Time magazine

China has over a $2 trillion dollar surplus compared to USA’s $11 trillion dollar deficit  

Note – all these figures are suspect. China’s even more so than the USA’s.

The Bottom Line – The economic trend is clear. China is economically rising and the USA is sinking. Right now, the economic gap between these two counties is closing at an accelerating rate.. You may not like this trend – but if you have kids or grandkids teach them to speak Chinese.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

STOCKS

Technicals & Fundamentals

Major US stock markets (and most foreign markets) rose yesterday in decreased below average volume. 

XLF - The ETF that tracks financials (mostly shadow banks) rose +4.83% in decreased, below average volume.  Financials have lead this rally and if they  collapse so will almost all other sectors. The loss in volume (the #1 confirmation factor of a price move) is troubling for the bulls.  This could be the first sign of a correction.

Short Term Outlook - Similar forecast to yesterday – First technical chink in the bulls armor appeared Tuesday.’s big volume sell off. A small gain yesterday in decreased volume is not bullish.  

Too early to make a call, but short term traders should pay attention. The Danger signs to watch for - another big price/volume decline probably led by financials and/or stocks moving lower on no news or good news.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING! 

Why give bailout money to the  pond scum sucking shadow banks/institutions that caused the financial meltdown and not to me? – Obama’s outlines his economic plan – Imagine This – Liverpool and Antwerp train stations

Banknotes from all over world from British Museum

Imagine This

Your walking through a train station and suddenly the following happens Liverpool Train Station & Antwerp Tain Station. The Liverpool strain station has already had over 10 million views on You Tube, but the Antwerp one is a bit better. T-Mobile is the originator.

Obama’s Economic Outline

This guy is a gifted communicator. Where we’ve been economically and where we are going – yesterday’s major economic address. He went a long way in convincing me and you know I’ve been a fierce critic of his economic team. Speech and video here.

Why Pond Scum Bankers Get Bailed Out

This is just Economics 101. It is the most asked question/discussion I get personally and one that all American’s are asking. Why not just give me the money instead of the pond scum banks that created the whole financial mess?

• Banks by law have to keep $1 in assets to every $8 to $10 they loan out. This sends 8 to 10  times more money flowing into the system than giving you a dollar. Banks, if they are run properly, are far more crucial than you because this 8/10 to 1 ratio of  capital going back into the economic system. This dramatically impacts you from mortgages to credit cards.
• Without a viable banking system the economy collapses. The crooks at AIG were the end line in the daisy chain of over leveraged shadow banks.
• You are getting a tax cut or all but the most wealth Americans are. However for you the money has a limited impact on the overall economy.  At best,  it has only a one to one ratio going into the economy because you might save it or use it to pay down debt.  

The problem is everyone got massively over leveraged. The shadow banks in collusion and/or stupidity with some conglomerates, insurance companies, politicians and rating agencies loaned out say $30 for every one dollar of  assets,  instead of the historical $8 to $10 ratio of assets to loans. Many consumers (YOU) and shadow banks added way too much debt to their bottom line.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

STOCKS

Technicals & Fundamentals

For the first time since the current rally began in early March volume has confirmed a major move lower. Volume, our #1 confirmation factor, rose and was well above average.  Usually two or three of these big volume & price drop days are enough to turn the market back to the bear camp.  So watch the volume.

XLF - The ETF that tracks financials (mostly shadow banks) fell -6.59%% in increased, well above average volume.  Financials (mostly shadow banks) have lead this rally and if they  collapse so will almost all other sectors. The 7% loss is less than 1/2 of the 16% gain on Monday and we’ve only had one day of heavy volume, but this could be the first sign of a correction.

Monday’s Technical Outlook - After a major rally what bulls want for a minimum is for volume to decrease and markets to hold onto over 50% of gains. Obviously preferable would be another rally day in big volume

Short Term Outlook – First technical chink in the bulls armor has appeared. Too early to make a call, but short term traders should pay attention. The Danger signs – another big price/volume decline probably led by financials and/or stocks moving lower on no news or good news.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING! 

Let’s ignore the media and its crisis of the day.  Let’s focus on the reality of what happening or the major trend being established.  History  is repeating itself. You lean the lesson or you’re doomed to commit the same mistake again and again and ….  Simon Johnson, MIT prof and former chief economist at IMF  on history repeating itself - “The Quiet Coup”

Simon Johnson

History Repeats Itself

“The Quiet Coup” in the current issue of the Atlantic magazine demonstrates that we have seen the same kind of financial crisis happening over and over again. Let’s look deeper into Johnson’s editorial.

There is a coup. A  oligarchy takes over. They enrich themselves by plunging the country further into debt and what ends up is a explosive revolution or an outside entity – The IMF (International Monetary Fund) for which Johnson was the chief economist intervened to fix the problem.

The same thing has happened here. From 1975 to 1983, he points out that financials made up “16% of domestic corporate profits” and it rose “41%” in the USA.  As this financial oligarchy grew in power, it bought most major politicians from Republican  Senator Phil Graham who wrote the original deregulate the shadow finance industry in 98 to Democrat Chris Dodd who inserted bonuses for AIG executives today.

Perhaps there was a hidden conspiracy, perhaps it was pure greed, perhaps it was arrogant stupidity and perhaps some combination of the three.  What matters more than the cause is the solution. For the IMF the solution that worked was to break the oligarchy, temporarily nationalize the banks, insert regulations, turn shadow banks into much smaller institutions, spread the wealth and then allow smaller capitalist banks/ industries to grow. Tough medicine.

Right now in the USA the shadow institutions – corporate giants (example- GE), Shadow banks (Citigroup), Insurance Companies (AIG) & Former Financials (Morgan Stanley)- the oligarchy – is fighting any change. Their mantra is the world will fall apart if you don’t allow us exist and work in the shadows.

The Bottom Line - The oligarchy needs to be broken, these shadow industries need be separated, no company should be too big to fail, and regulations imposed.  All of this is going to hurt Wall Street in the short term and hurt our economy. But the IMF has shown in the long run it can and has worked. 

If your interested in the best primer out there of the financial meltdown that is going to significantly impact almost everything YOU do over the next few decades see Johnson’s The Baseline Scenario’s Financial Crisis for Beginners outline and explanation

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

STOCKS

Technicals & Fundamentals

Major rally sparked by increased profits of major shadow bank Wells Fargo announcing much better than expected profits. Volume again confirmed the rally over all major US and most world stock markets.

XLF - The ETF that tracks financials (mostly shadow banks) rose +15.54% in increased, well above average volume. Volume, therefore, confirmed the move higher.  Also significant was the fact that XLF broke out of a three week long consolidation pattern.  - Investors411 has predicted an upside move out of consolidation  for weeks

Baltic Dry Index – broke its 21 day streak of moving lower and actually gained 1%. Stabilization here is good news.  The downward slope was an ominous sign, but it looks like this measurement of world trade has stabilized for now. Good news for bulls. (see chart at side of blog) Since this has 

Technical Outlook – After a major rally what bulls want for a minimum is for volume to decrease and markets to hold onto over 50% of gains. Obviously preferable would be another rally day in big volume.

• For traders Friday and this rally is mana from heaven. 
• For long term investors this rally a “suckers” rally.

More on this later. 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING! 

Two faced/Batman – “Par-tay” – Mad money, big money, fast money vs. the long term economic viability of USA and world. Special weekend Update on short term traders vs. long term investors & taxpayers. Danger Will Robinson Danger, Danger.

1990 DC comic (Neil Adams – pencil)

Two Face 

Two Face is often thought of one of Batman’s most infamous villains (see clip) A man of two faces – one a former crusading District Attorney, the other a wacko super villain.

One major mantra of this blog for weeks has been the infamous Shadow Banks/Institutions and their future for both our country and the stock markets.

As predicted (see Updates of last few weeks) the Shadow Institutions exploded higher  (XLF +15.45%) and Wall Street (@+ 3,5%) soared on Friday. Why not, taxpayers not bond or share holders are picking up the bill for shadow institutions trillion dollar robbery and our government is allowing them to crawl back into the shadows of less transparency/accounting. 

One face to this rally is that if you want to be a short term trader - there is “Fast Money, Big Money, Mad Money” to be made  NOW!  Par-tay! So, the two faced writer of this Investment blog would tell any trader ride the wave – make the money

But as a long term investor or a tax payer – if you are spending trillions to bail out big banks, allowing them to run in the shadows &  keeping their too big to fail status - there is going to another even more catastrophic bubble bursting in the future. Danger Will Robinson Danger Danger

“Even at the cratered Citigroup, a technical analyst was moved to write a report last month urging his peers to stop living in “denial” and recognize that we are witnessing the end of “25 to 30 years worth of excess.”  writes Frank Rich in today’s NYT

Rich has his own two faced dilemma – No one is better faced to make this change to a new economy than Barack Obama and  Obama has paradoxically chosen a Dr. Strangelove “the last person to serve as an inspiring role model for alternative values would have been Summers.”  to lead us out the economic meltdown we face. 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

US stock markets are closed (Good Friday) so let’s take a short break from  shadow banks and increased weapons spending to look at a few political cartoons about the spring holiday. Vic Harville is the cartoonist.  Happy Easter to everyone. 

Harville’s message here is hard to miss.  Still the bunny’s got a whole lot of outstretched love.

The Easter Bunny (our kids) on his/her way to the Iraq war.

Harville has his own book of  political cartoons like the one below and you can find him at ArkansasNews.com

HAPPY  EASTER 

PS – I truly looked for some combination of the Easter bunny and Shadow banks.

Whose getting the preferred treatment? Shadow banks/institutions like Citbank or American manufacturers like GM – A cartoon. Fixing the Financial News Channel- CNBC – Remember Jon Stewart’s drubbing of Jim Cramer? Now comedians are banding together. A fearless market forecast- wear your rally cap.

cartoon credit – Daryl Cagle

Fixing Financial News – CNBC

The major financial TV channel, by far, is CNBC. We all remember when Jon Stewart opened a can of whoop ass on its most politically moderate host Jim Cramer. The hosts of the rest of the shows like Cramer are  basically cheerleaders for their advertisers - Wall Street

Now a group of comedians is doing something to fix the biased network. “Jon Stewart made the case, now we’re demanding action.”  A funny 4 minute video, but more importantly 20,000 people and economists have asked CNBC to start holding Wall Street accountable. 

You too can sign up to make financial journalism accountable at – FixCNBC.com

Together we can make a difference – take a minute and sign the petition – In the long run it will protect your money, our economy and your job if we have less biased financial reporting.

(Sorry yesterday’s link allowed for no comments and it took a long time to appear- I have no idea what went wrong.)

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

STOCKS

-

Technicals & Fundamentals

 Markets moderately moved higher yesterday. Volume was well below average.  Therefore volume offered NO confirmation of the price move.  

Overall this week looks like a consolidation of the previous three weeks gains. Just what you want is you’re a bull.  The chart to watch is XLF (ETF for financials – See below) Usually after a big move & then consolidation, stocks continue to move in the same direction,  This should make bulls happy.

Baltic Dry (Sea) Index - (see chart link on side of blog)  Measures flow of goods/trade and is a leading economic indicator.

Since 3/10 the BDI has fallen each day and yesterday was again  no exception. Another @0.20%  Total loss from high more than 31%.   How many days in a row can an index fall?  Right mow it’s 21 trading days in a row.  The rate of change (fall) has slowed dramatically.  We could be seeing a  bottom here.  This would be positive for markets

Reading the Tea Leaves - Same mantra - As long as  Shadow Banks/Institutions are going to get bailed out by taxpayers instead of bond/stock holders then the rally is on. That seems to be the direction Geithner Summers & Bernanke are headed. Trillions in wealth is changing hands.  

Fearless Forecast – The consolidation will end & the rally will continue as shadow banks announce better than expected earnings.   With diamonds, rubies and gold being showered on shadow banks and a big treasure chest to hide accounting procedures in these banks are going to SHINE this earnings season. Its baseball season so put on your rally caps.

Shadow Banks/Institution Watch

XLF (financials/banks) is therefore the key sector to watch. Checkout the chart and technically you will see that the XLF has tried to move above @9.75 for almost 3 weeks and failed. It closed at 9.20 yesterday up +0.55%.

Add Insurance companies  to those receiving bailout funds. Beyond the infamous AIG others are lining up. The reason for the modest rally in stocks yesterday is insurance companies shot up significantly. Story from MSNBC here.

Bottom Line - The more the tax payers bailout shadow institutions and the less transparent they are allowed to be the better these stocks will perform in the short term. The worse it will be in the long term for taxpayers and the national debt.

Trends –   The worshiping of violence in the USA. Gun permits = mass murders. Shadow banks used to wait for the latest gift from the Bush administration. Now they wait for their gift from the Obama administration to rally the stock market. New Shadow Bank Watch Sector posted in STOCKS section of blog. Happy Passover.

Gun Permits – The Common Thread in 57 Mass Murders Since March 10th

Bravo to local news station Channel 10 in Syracuse NY. The above photo from them is the gun permit of Jiverly Wong who killed 13 innocent people in Binghamton NY.  This story and more carried by Huffington Post.

The recent rampage of mass murders in the USA all had one thing in common – these killers had GUN PEMITS. No where in the developed world is it easier for a mentally deranged or emotionally disturbed sicko to get a gun. 

Americans Love their guns. The National Rifle Association (NRA) protects all gun lovers. Our 3% of the population produces 50% of the world’s weapons.

The Huffington Post story carries examples like the bill in Texas that will allow 300,000 Texans to bring guns on college  campuses.

“There are 280 million guns out there in the USA” says Scott Vogel of the Freedom States Alliance  Do the math 280 million guns is a humongous amount of weapons – you’re bound get an “epidemic” of violence. Just like Tthe more you keep increasing the amount of nuclear weapons the easier its going to be for a terrorist to use one.

You can do something about the causes behind growing violence and join FSA Then again you can wait till one of these emotionally disturbed sicko’s with a gun permit shatters a life close to you.

Happy Passover

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

STOCKS

-

Technicals & Fundamentals

 Markets lost ground as volume was well below average.  You never like to lose over 2%, but volume did not confirm the move so technically  last two days retreat = still short term bullish – a weak declining volume retreat. 

Baltic Dry (Sea) Index - (see chart link on side of blog)  Measures flow of goods/trade and is a leading economic indicator.

Since 3/10 the BDI has fallen each day and yesterday was again  no exception. Another @1.35%  Total loss from high more than 31%.   How many days in a row can an index fall?  Right mow it’s 20 trading days in a row.  The rate of change (fall) has slowed a little. Perhaps a positive.

Reading the Tea Leaves - From Yesterday - As long as  Shadow Banks/Institutions are going to get bailed out by taxpayers instead of bond/stock holders then the rally is on. That seems to be the direction Geithner Summers & Bernanke are headed. Trillions in wealth is changing hands.  

Forget all the other chatter, this massive transfer of wealth to shadow banks, and allowing them to be less transparent is what is holding up US stock markets. 

If your just a dumb taxpayer you have plenty to worry about because it sure looks like your getting robbed.

Shadow Banks Watch

XLF (financials/banks) is therefore the key sector to watch. Checkout the chart and tecnically you will see that the XLF has tried to move above @9.75 for almost 3 weeks and failed. It closed at 9.15 yesterday down -2.87%.

Earnings season does matter, but what happens to the power of shadow banks in the shorter term, (next month or two) dictates what happens to the markets. Shadow banks/industry will break out above 9.75 when the next large gift from Summers, Geitner and Bernanke gets showered down on them. 

Next up comming decision – How much of the insurance industry (think companies like AIG) will be allowed to take TARP funds.

How bad is the economy? One photo says it all. IMF -toxic debt = @$4 trillion. The Good – Hopes are up since the Inauguration, The Bad – Unemployment numbers/comparison chart. The Ugly – Larry Summers the Clinton’s cheerleader for deregulating banks and a huge conflict of interest

How Bad is the Economy?

Thanks to one of you who sent this in with caption

CATS ARE SO DRAMATIC

photo credit – somebody called terrance who sent it to lennel.t- lennel.moi-nonpl.us/?p=807

The Good

A NYT/CBS Poll finds more optimism about the country since the inauguration. Folks approve of the way Obama is handling the economy. Headline NYT story here

The Bad

Friday’s Four Bad Bears chart got 20 million Google hits  according to a Monday editorial. You got the chart on Investors411 Friday AM.

Behavior economics is important. If so many folks (potential investors) are looking at the long term bear charts –  you  should be concerned. (Click on 4/3 on calender at top of blog to see chart again).

Here’s another chart you are not going to like. From Justin Fox at Time magazine. Titled: Job Losses Are Now a LOT Worse Than the 81 82 Recession

The brown line is the current recession job loss.

Obama in the Matrix – Everyone is taking shots at Barack/Neo, but…. Military budget gets announced to fearful Americans fighting the Evil Empire. The two, Two Cows – understanding AIG and Market to Market accounting with humor. They are back – after 101 years of trying – will they succeed?

photo from About.com: political humor

Obama in the Matrix

Obama is being totally dissed by the right that wants him to fail. Even lefties like Nobel Prize winners like Krugman  &  Stigletz as well as this blog are taking some shots at his administration. But his poll numbers remain high and USA Today headlines Obama’s trip to Europe as a “Success”

Military Budget

Today’s the day the Pentagon budget gets announced.

Lots of us hoped our paranoid country that spends what the entire rest of the world does on weapons would cut back just a wee bit this year. But alas our 3% of the population has to be armed and ready to fight the rest of the world. You thought only the NY Yankees were the Evil Empire, but to fearful Americans the rest of the world is still the Evil Empire. Well, Obama is giving the Pentagon less than they asked for, but more than last year. Another record budget story

The Two Cows

photo from Clusterstock

John Carney  has some easy to understand, humorous ways to comprehend, both the Mark to Market and AIG using two cows. You can spend hours reading different editorials, like me, and still have a zillion questions, or simply skim his two, two cow stories. 

101 Years

Finally – Spring is in the air and that means the professional game of baseball that started in 1870 will be filling dozens of stadiums with thousands of excited fans. The dreaded evil empire, the New York Yankees, will once again take on the forces of good – the beloved Boston Red Sox.

The major Major league baseball story is about the team that will field nine players as they have for the last 101 years without winning a world series – The Chicago Cubs.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Four Bad Bear Markets – Understanding long term bear markets is critical and the following two charts will give you a relative idea what a bear market looks like.  The G 20 – rhetoric and results.  Israel – right wing takes control and spurns Obama/Clinton peace process. Stimulus & Budget. Employment #’s. Why the current rally may continue – “Rotation” and volume.

Click on either chart to see bigger chart. Charts from dshort.com

Four Bad Bears

These charts graphically put in perspective where we are relative to 3 other major bear markets starting with the Dow from 1929 to 1932  The first chart is over 34 months and the second is over 10 years.  The second includes the often never mentioned 9 year long NASDQ bear market.

You can draw you own conclusions, but notice how far we’ve fallen and how close we are to the Dow 1929 to 1932 crash. Each bear market is different, and we are fundamentally moving a lot quicker than they did in 1929 to fix the problem.

G – 20

The rookie, Barak Obama, didn’t hit a home run but he certainly was a hit. He translated his world wide star power into results from refereeing a France/China verbal spat to getting a trillion for emerging markets. You can read the NYT editorial  the G 20 here More came out of G 20 than almost everyone expected. Obama message – “the world is in this together” – resounded.

This AM (EST) Obama is speaking to an packed audience in France and tying the failure of a mortgage in Florida to the failure of a bank in Iceland.

Israel

My closest Israeli friend absolutely hates the newly elected Netanyahu government. It’s like giving American neocons complete control of Israel. Netanyahu has already told the Obama  “Stop Iran or I Will.” 

Netanyahu picked an extremist as his foreign minister – a former Moldovan night club bouncer named Avigdor Lieberman, who like Iran’s Ahmadinejad has made some outrageous threat. He immediately  “spurned” the peace process started by Bush and supported by Obama/Clinton.

Stimulus & Budget

Although many Republican’s voted against Obama’s stimulus plan the last Republican (South Carolina) holdout governor caved in and will accept the stimulus for his state to keep teachers in the schools and cops on the street.

House and Senate have passed basically the Obama budget.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING